In an effort to acquire more community bank customers for its electronic bill payment services, Checkfree Corp. has forged an alliance with Fitech Inc. of Heathrow, Fla.

The pair agreed to integrate Checkfree's bill payment processing software with Fitech's home banking software, which is marketed primarily to small financial institutions. Four community banks - all with under $250 million in assets - are set to test the result of this partnership in the next 30 to 60 days.

"This gives us the opportunity to get into markets we might not otherwise address," said Hugh Fraser, vice president of wholesale financial services for Columbus, Ohio-based Checkfree.

Checkfree, the nation's largest processor of electronic bill payments, has a number of reasons to look for new sources of transaction volume. The most important of these is the likely loss this summer of processing business from Intuit Inc.

Intuit - maker of the nation's most popular personal finance software, Quicken - at one time accounted for as much as three-quarters of Checkfree's transaction volume, according to Intuit's chief financial officer, William Lane. Checkfree officials have in the past declined to comment on this estimate.

Intuit has reputedly reduced its reliance on Checkfree since last August, when the software company acquired its own processor, National Payment Clearinghouse Inc. The long-standing contract between Checkfree and Intuit, which expires this summer, will not be renewed, sources said.

Though Intuit's pending acquisition by Microsoft Corp. would strengthen its position in the home banking and electronic commerce markets, Checkfree is not taking recent developments lying down.

Checkfree has been "aggressively pursuing as many bank deals as possible," according to Adam Schoenfeld, an analyst for Jupiter Communications Co. and editor of its On-Line Marketplace newsletter.

Noting bankers' fears of Microsoft's moves in the home banking and bill payment arenas, Mr. Schoenfeld sees Checkfree as aligning with the bankers' camp in what he calls the "slugfest between Checkfree and Microsoft."

While Intuit and Microsoft sit in a legal limbo - awaiting approval for the acquisition from the Department of Justice - Checkfree has been shoring up its position through partnerships such as the one with Fitech and through legal action.

Last month Checkfree expanded an existing agreement with Society National Bank of Cleveland, a unit of Keycorp, for credit card processing. It also agreed to handle bill payment services through screen telephones from SmartPhone Communications Inc. in March.

In January, Checkfree filed suit against Intuit's National Payment Clearinghouse for infringing on a patent it obtained on bill payment processing.

"They're (Checkfree) striking while the Intuit iron is cold," Mr. Schoenfeld said. "The longer the Intuit deal takes, the better for Checkfree."

With the Fitech deal, Checkfree hopes to expand its list of client financial institutions.

Checkfree currently handles bill payment processing for about 30 banks. About two-thirds of these hail from the company's agreement with MasterCard International on its Master Banking program.

Fitech, meanwhile, has about 800 mostly community-size financial institutions running its Goldleaf and Goldpac products, according to Robert Chamberlain, president of Fitech.

According to Mr. Fraser, the Fitech customer base represents a ripe and largely untapped segment for home banking and bill payment.

Using the integrated Checkfree/Fitech product, bank customers will be able to obtain balances, pay bills, and apply for loans. The four banks slated to test this new product are: Boulder Valley Bank and Trust of Boulder, Colo.; Old Second National Bank of Aurora, Ill.; Northwest Bank of Davenport, Iowa; and Merchants and Farmers Bank in Kosciusko, Miss.

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